90 Australasian Journal of Economics Education
Vol. 3. Numbers 1 & 2, 2006
IS ECONOMIC PHILOSOPHY A SUBJECT WORTH
TEACHING?
L.A. Duhs*1
University of Queensland
[email protected]
ABSTRACT
Economic philosophy is anything but a part of the mainstream diet in the
course of an economics education. Yet there are those – including
occasional Nobel prizewinners – who argue that an understanding of
economic philosophy is absolutely fundamental to an understanding of
economics, of why economists disagree and of why “economic rationalists”
are often derided by those from other professional backgrounds. The
argument put in this paper is that many social science debates hinge more on
the values or social philosophy implicitly involved than on technical matters
of economic 'science', and that a nuanced understanding of economics
requires that each school of thought be traced back to its foundations in
terms of its implicit economic philosophy a prioris.
Keywords: economic philosophy, metaphysics, a priori commitments, teaching economics.
J.E.L. Classification: A12, A13, A23, B15, Y8.
1. INTRODUCTION
In What’s Wrong With Economics (1972:10), Benjamin Ward
offered a totem pole of sub-disciplines in order of prestige within the
economics
profession.
Macroeconomics,
microeconomics
and
econometrics were at the top of the totem pole and HET and economic
development were at the bottom (where development economics is unlikely
to remain today). Economic philosophy did not rate a mention. In the same
vein, JEL listings do not explicitly include economic philosophy, although
many other sub-disciplines are named. Economic philosophy is merely
embraced implicitly within the more general category of “relations with
other disciplines” - which more commonly conjures up images of economic
psychology. Scott Gordon (1978: 728) likewise concluded that
philosophers have a lot to learn from economists, but not vice versa: “That
mythical creature, the economist qua economist, need not pay much
1
Thanks are due to AJEE referees whose helpful comments led to significant improvements in this paper.
Australasian Journal of Economics Education
Vol. 3. Numbers 1 & 2, 2006 91
91
attention to philosophy, good or bad, but the philosopher of science had
better pay attention to economists, good and bad”. More pointedly, on the
level of the functioning of economics departments within Australian
universities, departmental reviews have been known to call for the axing of
economic philosophy courses, largely on the ground that academic selfindulgence cannot be permitted in an age of constrained university
resources when there is so much to be taught in terms of technique.
Adopting a quite different, and sometimes quite opposite, view
however, are such eminent economists as Joan Robinson, E.F. Schumacher,
Robert Heilbroner, Gunnar Myrdal, J.W. Nevile, Benjamin Higgins,
Amatai Etzioni and Amartya Sen. For them, economic philosophy is a
matter of importance. Indeed, for some of them it is a matter of the most
fundamental possible importance, and one whose pervasive relevance –
even if at a level often left implicit – is the stuff on which economic
theories are actually founded. For them, there is important truth in the
aphorism that “an ideology is what we think in, not of”. And for them, in
consequence, there is an undeniable and irremovable element of ideology
in economics and its teaching. Hence for Joan Robinson (1964) economics
is part science and part ideology. Transposed into Myrdal’s words (1968:
32), “a 'disinterested' social science has never existed and never will exist”,
since there is an inevitable a priori and there cannot be a view, except from
a viewpoint. And for Heilbroner (1996a) there is an implicit economic
philosophy or ideological element in economics – the role of which is to
defend the scientific pretensions of the profession - which needs to be
recognised as being important to the understanding of economics and its
contribution to social welfare. Indeed, nothing is more important in terms
of understanding why economists disagree, and why different schools of
economic thought part company with each other on a range of both
theoretical and practical policy issues. In short, the contentions of this
paper are that an understanding of economic philosophy is a prerequisite to
a nuanced or rounded understanding of many contemporary controversies
in economics, and that a fundamental understanding of economics is
impossible without detailed attention to the philosophical premises on
which economic theory stands. The theme addressed in this paper therefore
reprises the Cropsey (1955) / Ward (1972) / Schumacher (1974) / Etzioni
(1988; 1991) / Samuels (1990) / Neville (1998) view that it is not
economics that is the imperialist social science, but economics which has
itself been colonised by one or another political philosophy.
92 Australasian Journal of Economics Education
2.
Vol. 3. Numbers 1 & 2, 2006
THREE PERSPECTIVES ON ECONOMICS AND THEIR
PHILOSOPHICAL BASES
It is useful to start with a three way division [Ward 1979; Cole,
Cameron and Edwards 1983]. Economists commonly classify themselves
as (i) orthodox neoclassical, (ii) institutionalist, or (iii) radical. In
pragmatic policy terms this means that they tend to favour increasing
amounts of government intervention in economic affairs as we move from
a neoclassical to a radical/communist perspective. At a more fundamental
level it means that the advocates of these respective schools accept that at
the root of their theoretical perspectives lie the influence of certain
philosophical a prioris related to their conceptions of the nature of
humankind and to questions of ontology and teleology. Much of the debate
between these perspectives hinges on the interpretation of such simple,
putatively unambiguous words as ‘man’, ‘freedom’, 'equality' and
‘rationality’. A starting point is to examine the orthodox neoclassical
position as one underpinned by adherence to the philosophical positions of
Adam Smith and John Locke, while examining within the institutionalist
perspective the deference commonly shown to the philosophy of John
Dewey, or sometimes to Immanuel Kant or J.J. Rousseau (Duhs & Alvey
1989). In the case of the third or radical perspective, Karl Marx provides
the most obvious philosophical underpinning, at least as far as communism
is concerned, but various mixtures of Aristotle, Kant and gender studies
also play a role in underpinning other conceptions which are deemed by
some to be radical, albeit they may be considered by others to be merely
minor variations on orthodoxy.
Economics sometimes celebrates itself as the queen of the social
sciences and proclaims itself to be an imperialist social science carrying
other disciplines forward by injecting economics into sociology,
psychology, law and such like. What is argued in this paper is more or less
opposite i.e. that the continued existence of different schools of economic
thought (orthodox neoclassical, Chicago School, Austrian School,
institutionalists, evolutionary economists, economic personalists etc)
reflects the importation into economics of different philosophical
preconceptions. To that extent, the question of why economists - or
schools of economic thought - disagree is inseparable from an
understanding of the philosophical underpinnings of those theories or
schools of thought (Duhs 1982; 1994; 1998; 2005). Again as Myrdal puts
it “there is an inevitable a priori”, and much derives from that fact.
Australasian Journal of Economics Education
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TABLE 1: Three Schools of Economic Thought and Their Underlying Economic Philosophies
Principal economic
Neoclassical Orthodoxy
Institutionalist Thought
Radical Thought
the “market works”
The “market works subject to institutional constraints”
“markets are dangerous and divisive”
small government
some selective government intervention required
big government
individualism (sui generis individualism)
individualism in social or community context
individuals define themselves through the collectivity or brotherhood ie Adam Smith m
John Locke
John Dewey (see JEI) and the notion of pragmatism in the social evolution
Marx
features
be inverted and stood on his feet
Underpinning
philosophy
of values;
Adam Smith
Aristotle (in a different conception of radicalism eg for Cropsey, and putatively for
The Bible (for Schumacher; also for 'economic personalists');
Sen)
J.S. Mill
Darwin (for evolutionary economists);
Kant (for Etzioni)
Philosophical
Locke: man is selfish and acquisitive (ie
Ward 1972: both neoclassical and Marxist theories have inherently weak
Marx: man is selfless and collective; so invert Adam Smith to get to the root of the
Conception of the
individualistic and fundamentally
notions of the nature of man at their cores. Alternatives are available.
nature of man.
nature of man
concerned with self preservation, and the
(Opposite to the requirements for private property and unlimited acquisitiveness in a
preservation of the extended self in the
Schumacher: adopts a generic or species conception of man characterised
Lockean conception of man, the Marxist conception requires common property and
form of unlimited acquisition of the
by significant points of commonality, versus sui generis individualism.
equality in order to match 'good' social institutions to what Marxists deem natural for
material means for comfortable existence)
man)
Etzioni: “At issue is human nature.”
Smith: commonly taken to accept that man
is self-interested.
Aristotle/Ancient Greeks: man is a social animal. What is held in common by all
Dewey: there are no 'fixed ends' and 'growth' itself is the only moral 'end'
Interpreted by Sen to believe neither of the
two propositions commonly attributed to
defined by the common senses of reason and speech.
Darwin: man has no fixed nature
him.
Differently interpreted by Cropsey; and by
Hirsch, Alvey, Fitzgibbons, and others.
'men' is more important than what distinguishes them severally. 'Man' is therefore
Kant: man has both a sensory self and a moral self.
94 Australasian Journal of Economics Education
Teleology
Non-teleological
Vol. 3. Numbers 1 & 2, 2006
No absolute, definitive or timeless teleology, but there is an implied
Marx: nominally a-teleological, but ends up teleological insofar as communism is
historically relative crypto-teleology for some institutionalists (eg Myrdal),
said to be the inevitable result of history.
if not for all of them.
Cropsey: believes in a natural teleology.
Sen: explicitly non –teleological, yet reflects an inner tension with some cryptoteleological passages
Rationality
Partakes of choice of means but not choice
Sen: in economics “rationality” is understood in several (inadequate) ways
Marx: rationality is inherent in history, via the dialectic, so that rational results
of ends
(1977; 1987)
ultimately prevail even if they are not willed by (a majority of) individuals
themselves
Streeten: “rational behaviour has been equated with selfish behaviour”
(1995: 211).
Cropsey: human reason partakes of the choice of both means and ends (following
Aristotle)
Myrdal: all knowledge, and all ignorance, tends to be opportunistic
(1968:25)
Lutz & Lux: prior to Hume, rationality also meant choice of ends.
freedom
Endorses individual freedom from external
Freedom from external restraint is not the same thing as freedom to do those
Marx: freedom to immerse oneself in the human brotherhood, once communism is
constraint.
things which are fulfilling in life (or which are consistent with an implied
achieved
Hence individuals have the freedom to do
teleology).
whatsoever they choose, and there is no
The understanding of freedom is interconnected with the understanding of
Sen: removal of “unfreedoms” requires recognition of State and market as
higher (transcendent) yardstick than the
equality of opportunity, which for institutionalists does not mean an
complementary institutions. People need to be free from constraining circumstances
free choice of any one individual.
unhandicapped race in a free market, so much as a recognition of the need
as well as from legal fetters.
In consequence, all values are relative.
to treat unequals unequally.
Cropsey: ‘freedom to’ do something specific in keeping with the fulfilment of a
[Whereas privatising schools is an obvious step forward for Friedman and
given natural teleology is quite different from ‘freedom from’ external constraint,
orthodox neoclassicists it is more problematic for institutionalists, who see
which may become mere licence. Social science has not disproved the possibility of
some intervention as being necessary to achieve meaningful equality of
absolute values, or of a generic nature of man and a common teleology, despite
opportunity and thus to achieve freedom, properly understood.]
historicist claims to the contrary. This view is radically opposed to neoclassical or
libertarian conceptions of economics (and also to Marx). It is radically opposed to
their conceptions of the nature of man and to their conceptions of what constitutes
freedom.
Austrian School Catholic “economic personalism” and Pope John Paul II: affirm that
freedom entails something more than libertarian freedom. The 'economic
personalist' view is compatible with the Cropsey view, but derives from a different
root.
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Methodological root
Positivism; fact/value dichotomy
Vol. 3. Numbers 1 & 2, 2006 95
Are facts themselves theory-laden (since they are seen through the lens of
95
Marx: dialectical materialism
theory) and hence values- laden?
Cropsey: Socratic dialectics.
Myrdal: a value neutral social science is a logical impossibility; there is a
methodological bias in modern social science. “The only way in which we
Sen: modern economics has been impoverished by the distance that has grown
can strive for objectivity in theoretical analysis is is to lift up the valuations
between economics and ethics.
into the full light, make them conscious and explicit...”(1968:33)
Samuels 1990: facts are themselves theory dependent.
Wilber 2004: economic theory is not value free; the fact/value dichotomy is
problematic.
Schumacher: the leading ideas of the nineteenth century (including
positivism and relativism) contain elements of truth, but deny the notion of
hierarchial order and the concept of a human species versus sui generis
individuals. The disease we suffer from today is metaphysical and requires
a metaphysical solution.
Historical
An historical perspective is inessential
perspective
Important; for evolutionary economists an historical perspective is essential
For Marxists, Economic history is an integral part of an understanding of the
e.g. in unravelling the role of path dependence
unfolding of dialectical forces, including interdisciplinary forces.
A non-historical approach is thus unscientific for those committed to dialectical
materialism.
utilitarianism
Fundamental;
J.S. Mill: Better to be Socrates dissatisfied than a fool satisfied.
indisputable
Utilitarianism is attacked by those who see endogenous (economic) conditioning of
tastes (Marx) or those who subscribe to a teleological view (Aristotle; Cropsey) and
Myrdal: conservatism within social science methodology has constrained
economists from departing far from the traditional roots of economics in the
philosophies of utilitarianism and hedonism.
Dewey: hostile to utilitarianism
Schumacher; Lutz & Lux: the catch-all category of utility is fallacious;
issues of right and wrong cannot simply be reduced to issues of pleasure
and pain.
Etzioni, Kant: a moderately deontological position in preference to
utilitarianism.
Utilitarian judgements are distorted in the hands of either the deprived or
the depraved.
a need to transcend historicist influence.
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In endorsing this theme, Schumacher (1974: 77) emphatically objects
that many economists do not know that their theories are based on
particular conceptions of the nature of man and that their theories would
have to change if that underlying conception of man changed. In effect,
that is also what Sen (1987; 2000) has argued more recently, and what
Etzioni (1988; 1991) has tried to popularise in the context of social
economics. In keeping with that understanding, the case argued here is that
for economics to be taught well, what is needed is not only the retention of
HET but also its supplementation by the teaching of the history of political
philosophy. While Locke and Smith - and J.S. Mill - lie at the root of
orthodox economic theories and are relatively well known, Dewey, Kant,
Rousseau and the Bible may be found at the base of various institutionalist
perspectives, and Marx and Aristotle are both evident in radical
perspectives. Darwin's influence is also apparent in evolutionary
economics. Thus, the cast of relevant characters from the history of
political philosophy is much broader than conventional economics teaching
allows.
3.
IMPLICIT ECONOMIC PHILOSOPHY IN THE TEACHING
OF ECONOMICS:
3.1 The Roots of Orthodoxy in Adam Smith, John Locke and J.S. Mill
Interpretative issues abound in the interpretation of any significant
philosopher. There is certainly no shortage of interpretations of Adam
Smith, and indeed there is still something of an Adam Smith industry today
with recent interpretations offered by Sen, Alvey, and Fitzgibbons, and
shorter interpretative commentaries offered by Wilber, Hirsch and others.
These varying interpretations carry different policy implications with them,
and underscore the importance of the study of HET. It is simply not true
that all economists see Smith as the father of unbridled self-interest, or
indeed as the father of the Chicago School perspective associated with
Friedman, Becker, Coase, Posner and others.
J.S. Mill is also acknowledged as a foundational influence in
liberalism, and here too there are significantly conflicting interpretations.
Friedman is emphatic that government intervention is commonly not just
ineffective but actually counterproductive, and that – in accordance with
his understanding of J.S. Mill - the only legitimate restraint that
government may impose upon individual freedom is one designed to
prevent us from impeding the freedom of others. In short, government has
no legitimate role whatsoever in protecting us from ourselves. Gildin
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(1964), however, reads Mill differently. He disputes this common
interpretation of J.S. Mill, and its implications for the acceptability of State
intervention. While Chicago School economists stress that for Mill
individual liberty is the surest source of social progress, Gildin stresses that
the question therefore remains as to whether Mill's chief goal is individual
liberty (as in Chicago teaching) or social progress (with its teleological
implications and consequent receptivity to certain State interventions).
Critics therefore give pause as to whether Friedman and Chicago may in
fact have misinterpreted both Smith and Mill, thereby institutionalising a
conception of metaphysical issues in (imperialist) economics which neither
of their putative intellectual fathers would themselves have been willing to
accept. Heilbroner too (1996b: 129-157) notes that Mill came to accept
that it is the proper end of government to seek to divert human energies “to
the legitimate employment of the human faculties, that of compelling the
powers of nature to be more and more subservient to physical and moral
good”. The Mill who started by saying every departure from the principle
of laissez-faire, unless required by some great good, is a certain evil, ends
up with a bold vision of government that respects any undertakings by
government which are beneficial to the general interests of mankind (such
as provision of free or almost free primary education), but which have not
been undertaken through private initiative (Heilbroner, 1996b). For Mill,
the individual who is so prior to the state may thus be seen as the morally
educated individual, not merely the present individual. In accepting that
the only unfailing source of progress is liberty, Mill thus intimates that it is
social progress that is the real goal.
Friedman (cited in Nevile 1998:173) acknowledges that “As
Liberals, we take freedom of the individual...as our ultimate goal”. What is
made plain by a study of economic philosophy, however, is that the
meaning of that 'freedom' is not unambiguous. In standard presentations
little or no question is raised about the interpretation of Smith, or of Mill or
of the meaning of 'freedom', yet the case for laissez-faire extracted from
these sources can indeed be questioned, as Sen, Wilber, Streeten (1995:
231-233; 344-346; 239; 282) and others contend. Critics of Chicago School
economics place more stress on Smith's notions of 'prudence' and
'sympathy', and Sen, Etzioni, Cropsey, Hirsch, Schumacher, Wilber and
others object that orthodox received theory omits the original moral roots
of Smith's formulation (see Hirsch 1977:137 and Sen 1987:22-28).
Accordingly, for them, the notion of economics as science and as
imperialist science suffers from the shortcomings of both an excessively
narrow self-interest interpretation of Smith's teaching and a determination
to view economics in isolation from its broader philosophical bases. As
Samuels puts it (1990) neoclassical economics is itself a form of economic
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Vol. 3. Numbers 1 & 2, 2006
science instructed by moral discipline – i.e. the moral discipline of
utilitarian calculation and of justice as enshrined in the notion of Pareto
optimality given extant entitlements. Accordingly, institutionalists and
other critics do not accept that the Locke / Smith conception of what is
natural to man at the root of orthodox neoclassical economics is a settled
issue or that it ushered in rationalism so much as relativism. In a word,
Etzioni, Schumacher, Hirsch, Sen and others stop short of accepting that
Locke said the last word in defining the nature of man, and stop short of
accepting that neoclassical economists have adopted unchallengable
definitions of 'man', 'freedom', equality of opportunity, or of rational human
behavior.
The Chicago School definition of individual freedom is certainly not
the chief desideratum for Sen, Schumacher, Cropsey, Austrian School
economic personalists or the Pope. For them, other metaphysical matters
impinging on teleology and the conception of the nature of humankind are
more fundamental (see Table 1 regarding 'freedom', the philosophical
conception of the nature of man, and 'rationality'). For them, the Chicago
definition of individual freedom is mere licence, unrestrained or unguided
by any recognition of whatever inheres in common in the human species,
and by any consequently attendant teleological implications. Accordingly,
it is important to recognise that Friedman's a-teleological goal, and
definition of freedom, are not necessarily the goal acceptable to, and
implicit in, the economic theories adopted by other economists. Indeed,
Friedman's statement of what constitutes 'our ultimate goal' is emphatically
rejected by various sub-groups, although it is doubtful that many
economics students ever confront such issues head-on.
It is to this implicit - and necessarily disputable - economic
philosophy that Heilbroner and others draw attention when they protest that
there is an ideological element in economics, and one that is commonly
concealed in the way economics is taught. In effect, a deep schism
separates those who wish to ignore metaphysical issues in order to embrace
the art of economic modeling in the name of 'rigorous science' from those
who care less about the refinements of mathematical models and who argue
instead that what is being taught implicitly about the a priori conceptions
of man, freedom, teleology and human rationality is far more important
than what is being taught explicitly. Indeed, economic philosophy – which
is commonly not listed for definition in Dictionaries of Economics – might
be defined as enquiry into the implications of just such a priori
commitments. It is noteworthy that “ideology”, for its part, is defined in
the Shorter Oxford English Dictionary as "A system of ideas concerning
phenomena, especially those of social life; the manner of thinking
characteristic of a class or an individual."
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3.2 The Philosophical Roots of the Institutionalist Perspective
As Wible puts it (1984: 1049), “The institutional school has
philosophical roots in the instrumental philosophy of John Dewey”. He
notes (p1051) that Commons, Mitchell, and Ayres all acknowledged a debt
to Dewey, and that Dewey offered an evolutionary, instrumentalist
approach to thought. Dewey regarded change as Nature's only constant, and
thus disbelieved in all kinds of idealism (p1055). For Dewey (quoted in
Kanne, 1988: 1213-1216), there are no fixed ends, and “Growth itself is the
only moral 'end'.”
Dewey's pragmatism found a sympathetic audience in the USA. He
maintained Peirce's hostility to utilitarianism (Mirowski 1987: 1017), and
became associated with groups opposed to laissez faire notions. For
Dewey, classical liberalism had avoided all the hard questions regarding
the definition of order. Mirowski (1987: 1001-1003) consequently argues
that institutional economics and neoclassical economics are the offspring of
entirely distinct philosophical traditions, and that “These two traditions
have a profound conflict over their respective images of a 'science', and
therefore profoundly incompatible images of 'economic man' and
'rationality'.” Mirowski accordingly concludes that the claim that economic
'science' has repudiated philosophical preconceptions is nothing but a vain
facade, and that the roots of disagreement between contending schools of
economic thought thus lie in the divergent a priori definitions of man,
freedom, equality, rationality and teleology. Samuels (1990: 275) echoes
this position in concluding that metaphysics and science are not mutually
exclusive, and that in practice all disciplines are combinations of the two.
For Samuels, as for Myrdal, there is no value-free social science, and there
are unavoidable a priori.
Insofar as they follow Dewey in the belief that there are no 'fixed
ends', institutionalist economists seek to derive useful guidelines as to how
to bring the performance of the extant economy more closely into line with
evolving societal values. Institutionalists look to “instrumental valuation”
or “social value theory” in keeping with their attachment to an
understanding of the evolution of social values (Wisman & Rozansky
1991). For them, 'freedom' and equality of opportunity do not mean an
unhandicapped race in a free market. On a methodological level, they see a
methodological bias in modern social science, and tend to agree with
Myrdal that a value-neutral social science is simply impossible. Positivism
is attacked from a variety of philosophical perspectives, but commonly
because institutionalists view the fact/value dichotomy as problematic, and
because of the contention that even in matters of scientific description and
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Vol. 3. Numbers 1 & 2, 2006
prediction there is normative significance in the methodological criteria
employed. According to Samuels (1990: 303) facts are theory laden and
theories are ideology laden, since valuation is inexorably involved at
several levels. In consequence, institutionalists don't believe that values
can be crushed out of economics by the practice of economic science (as
Schumpeter contended), and - that being the case - it is best that the
author's values be stated explicitly (Samuels 1990: 297, a la Myrdal). They
therefore tend to see the positivistic theory / value distinction as untenable
(Wisman & Rozansky 1991).
The institutionalist camp is itself a broad church, however, with
ample room for disagreement within it, as well as disagreement with the
devotees of Locke and Smith in the orthodox neoclassical camp. Dewey is
not alone at the root of the institutionalist position, and Schumacher for one
is at least as critical of Dewey as he is of those outside the institutionalist
perspective (Duhs & Alvey 1989). Indeed, Schumacher contends that the
three political philosophies of Locke, Dewey and Marx which respectively
underscore the three recognised perspectives of orthodox, institutionalist
and Marxist economics are all deficient. Instead of finding a solution to
human problems in the evolutionary philosophies of Dewey and Darwin,
and in the supposedly middle way of Dewey-style pragmatic
institutionalism, Schumacher finds an unacceptable historicism and
relativism there instead. This is inevitable, of course, given that
Schumacher seeks to take his bearings from a Biblical conception of the
(innate) “nature of man”. This Biblical view necessarily clashes with
Dewey's evolutionary perspective, which itself decries the notion of a fixed
species and of “fixed ends” and thus the possibility of absolute (Biblical)
values. This leaves Schumacher ultimately unable to follow in Dewey's
direction, since Schumacher and Dewey sit on opposite sides of the fence
in relation to Dewey's objection that traditional political philosophy has
been engaged in a misguided search for “fixed species and essences” (see
Horwitz: 752-3). For Schumacher it is Dewey who is misguided on the a
priori level of the conception of the nature of man, and thus of human
teleology and rationality. It may have been Locke's teaching that paved the
way for the elevation of the passions over human reason in the choice of
individual ends (or freedom of individual consumer sovereignty in the
matter of human teleology), but for Schumacher no solution or
improvement is to be found in the historical relativism of Dewey.
It follows that while both Dewey and Schumacher are hostile to
utilitarianism, the root of that opposition comes from separate sources. The
safeguard Dewey finds in pluralism or populism is no safeguard for
Schumacher, but merely another concession to historicism and a lifedestroying metaphysics of relativism and historicism. An appeal to
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Vol. 3. Numbers 1 & 2, 2006 101
evolutionary standards does not equate to an appeal to the teleological
standards of Biblical teaching, and while Schumacher and Dewey may
agree that much capitalist production 'merely swells the senseless bulk',
they remain divided as to what constitutes rational choice and what
constitutes mere chance.
Plainly enough, the a priori conceptions of “man”, equality of
opportunity, freedom, rationality and teleology within the institutionalist
perspective (as adumbrated in Table 1) are distinctly different from those
accepted by orthodox neoclassical economists.
3.3 The Philosophical Roots of Radicalism
Marx provides the most obvious philosophical root of radical
economics. He objected to the privations of the capitalism of his time, and
saw private property as the source of unacceptable inequality. He
conceived of man as a social animal, characterised by a radical equality. He
understood epistemology in terms of dialectical materialism, and saw
capitalism as home to festering contradictions which would inevitably yield
its revolutionary overthrow. For Marx, man is ultimately a selfless,
collective being, and thus one whose humanity is consummated by
elevating his social life into one of a sharing brotherhood. Accordingly, the
communist experiment might be seen as an attempt to create the “new
Adam in the new communist society”. That experiment has now all but
been abandoned, however, as China and other ex-communist countries
switch back to systems based on individual incentive and self-interest.
Radical challenges to orthodox neoclassical economics nonetheless
continue to exist, however, in the form of conceptions of economics which
find their roots in Aristotle, or perhaps in terms of environmentalism or
feminism. Consideration of Sen's Aristotelian conception is left to the
companion paper “Teaching Economic Philosophy: Economics, Ethics and
the Search for the Right Maximand” (Duhs 2006).
3.4 Some Practical Controversies
Rather than consider only the a prioris of different philosophical
positions, those with an interest in teaching economic philosophy and
political economy sometimes try to excite interest in their more abstract
arguments by use of provocative practical examples.
One useful case illustrates problems at the interface of economics
and ethics. It is provided by Lawrence Summers' leaked World Bank
memo regarding the economic efficiency of alternative ways of disposing
102 Australasian Journal of Economics Education
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of dangerous pollutants, including nuclear wastes (cited in Hausman &
McPherson, 1996). Summers argues that the dictates of economic
efficiency reveal the desirability of relocating the world's dirty industries in
poor countries - because those killed by pollutants will then be relatively
low paid workers, thus implying efficiency benefits for the world economy.
While this conclusion may reflect exemplary economics, it provoked
outrage. In fact, the point of Summers memo is to tacitly demand that
those who object to this proposal now bother themselves to sift through the
principles of neoclassical economics and establish just where it is that
ethical implications have entered into the putatively value-neutral scientific
analysis of how best to dispose of deadly pollutants. In short, if the
neoclassical economic analysis used by Summers is good enough to pass as
science in other contexts, why is it that so many are unwilling to see the
same principles accepted as science in this context? What implicit
assumption has suddenly turned rancid?
A second example is provided by Kenneth Arrow (1997). Arrow
considers Margaret Radin's 1996 book on 'contestable commodities' including such 'commodities' as baby sales, sales of human organs and
prostitution – and concedes that he himself encounters difficulty in
addressing such issues. Just why is it that many societies are determined to
withhold such 'contestable commodities' from the marketplace, when a
market for them could no doubt be established? Whereas Radin employs
the approach of Dewey's pragmatic tradition, in which the formation of
value judgements is a social process and outcomes are the result of
widespread (democratic) dialogue, Arrow himself admits to a lifelong
difficulty with Dewey's approach. He states that he has always had
difficulty understanding pragmatic discussions of broad principles, and
that, for him, the a priori principles in Dewey were not clear enough,
especially since the opposite of some of Dewey's 'experiential' arguments
seemed equally plausible. Arrow always suspected that the conclusions
were arrived at first and that the arguments were derived afterwards which is also what Allan Bloom (1975) says in criticism of Rawls's
philosophy.
Why then are baby sales uniformly banned? Arrow finds Radin's
explanation in terms of 'personhood' less than compelling, but concedes
that he does not himself have a good answer (1997: 765). In short, he
recognises that there is a significant problem here, but (like Schumacher)
finds it unlikely that a satisfactory solution can be found in Dewey. He
thereby implies the need for a broader understanding of economic
philosophy. He notes that economics and politics are separate systems and
implies that it is the proper role of politics - or philosophy – to determine
the proper place of economics. In thus deferring to the notion that politics
Australasian Journal of Economics Education
Vol. 3. Numbers 1 & 2, 2006 103
is the master of economics, rather than vice versa (as for Posner, for whom
economic efficiency becomes the new definition of jurisprudence: see
companion paper), he tacitly gives rise, however, to other questions about
the political or philosophical values implicit in orthodox economics. He
certainly implies a constraint on the Chicago School idea that economics
should be accepted as imperialistic social science.
Arrow notes (1997: 760) that Radin's fundamental argument is that
the commensurability implied in the use of a common utility function for
all human activities should be rejected. This is similar to Sen's objection in
“Rational Fools” (1977) to the notion that in economics individuals are
allocated one all-purpose preference function, as if they have no need for
qualitative distinctions between their interests, preferences and well-being.
Indeed, again approximating Sen and his deference to Aristotle, Radin
herself appeals to Martha Nussbaum's capabilities approach to the
(Aristotelian) question of what it is to be human, and thereby tacitly raises
the question as to whether an answer to her question of why some
'commodities' are contested is perhaps to be found in Aristotle, if not in
Dewey. At the least, Arrow's unease with what he accepts is a significant
question is a reason for re-examining the utilitarianism of orthodox
economics and for pondering the importance of the teaching of economic
philosophy.
Colander (2004: 36-39) likewise takes up the 'contested
commodities' issue in the name of what he calls the failure of market
outcomes - as against orthodox market failure - and objects that current
Principles texts encourage avoidance of such controversial cases. He
objects that if we don't deal with cases of the failure of market outcomes cases where the market does everything it should, but society still disallows
a market result, as in the case of baby sales – we fail our students. We
especially fail those students who are thoughtful enough to recognise that
there are implicit philosophical difficulties here worthy of confrontation.
In a way reminiscent of the Summers lethal pollutants case above,
Colander goes on to add that at the economics / ethics interface, economic
efficiency might similarly dictate that a cocktail of AIDS drugs not be
supplied to Africa because of the realities of demand and supply, yet few
would advocate the 'efficient solution' of simply allowing poor Africans to
die. In effect, this is a paraphrase of Rousseau's words that private property
may be something real, but human need is also something real. In short,
the Radin-Arrow-Colander examples amount to a silent criticism of the
Locke-Smith understanding of man and of economics, and a claim that
well-taught economics students need also to be exposed to Dewey,
Rousseau, Aristotle and others, and not be misled into believing that the
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important questions of philosophy have all been solved (in favour of
Locke).
A third pragmatic example is provided in the context of the schools
debate, which has been so important to Friedman in the last decade or
more. Friedman has condemned the schools sector of the US economy as
an island of socialism in a sea of capitalism. He condemns it as a backward
and unsatisfactory sector in terms of both efficiency and equity and in
terms of the literacy and numeracy results it delivers. For him,
privatisation of public schools (preceded perhaps by a policy of school
vouchers) is an obvious way forward in liberating impecunious parents
from unsatisfactory public schools and in restoring equality of opportunity
and freedom of school choice to parents. Educational sociologists such as
Halsey (1997), however, argue that Friedman misconceives what equality
of educational opportunity really entails. For them, the reality is that
privatisation of schools may merely cultivate an exclusionary process, such
that those who live in the poorest areas will be condemned to use the
poorest schools, thereby locking the poor into their poverty. Halsey et al
argue that it is not privatisation that provides a solution, but the recognition
that one generation's equality of opportunity necessarily creates inequality
of outcome, which if uncorrected thus creates inequality of educational
opportunity again in the next generation. On this understanding, an
interventionist program aimed at promoting equality of opportunity is
perennially required. Both Friedman and Halsey believe in equality of
opportunity, but what that means for Friedman (privatisation) is quite
different from what it means for Halsey (recurrent corrective intervention).
A fourth illustrative example is provided by a recent Paul Krugman
column in the New York Times (“Free to Choose Obesity?” 8/7/2005).
Given the prevalence of obesity in the United States and in Australia,
Krugman parodies Friedman's Free to Choose (1976) by asking if this
epidemic of obesity merely represents the free choice of many people to
become obese. According to Krugman, only ideologues or economists
could believe that. For him, there is therefore some implicit limit on
consumer sovereignty and on utilitarianism, and in circumstances in which
he judges that consumers have failed to exercise sufficient self-discipline
to act in their own best interests, Krugman is willing to call for some
corrective government intervention. What are the limits to the acceptability
of consumer sovereignty? From where do such limits derive, if they exist?
Krugman and Friedman are obviously at odds on this point, yet in principle
both could claim to be deriving their positions from J.S. Mill. In
Friedman's case that is from the Mill who wrote that every departure from
laissez faire is a certain evil, whereas in Krugman's case the implication is
that it is from the later Mill who wrote of the need to recognise qualitative
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distinctions between the pleasures and who putatively attached more
significance to “social progress” than to individual liberty. At least tacitly,
Krugman is adopting a set of a prioris about the nature of man and
ontology and teleology which sets him at odds with the value-relativism
and a-teleological approach of Chicago School economics.
3.5 Pareto Optimality and Metaphysics
The above examples make clear that economic philosophy is
important to the teaching of economics not only in a theoretical context.
They help explain Hodgson's objection (2001; 2004) that economics
students no longer have much prospect of an education in 'big picture'
questions
and
his
plea
for
greater
recognition
that
“Philosophy…encourages a critical frame of mind and can help locate the
big questions… In sum, just as the requirement of mathematics is now
virtually universal, so too should be some philosophy, and relevant parts of
the history of ideas.”
Cropsey, Schumacher, Myrdal, Etzioni, Wilber, Sen and others
endorse those sentiments. Minimally, what they would like to see is a
teaching broad enough to recognise that what underlies Pareto optimality is
not just the three conventionally recognised Pareto value judgements
(individuals are the best judges of their own welfare; individuals are
independent and additive in a social welfare function; more is better etc)
but also three additional metaphyiscal assumptions regarding relativism,
positivism and historicism.
Economic philosopher critics accordingly argue that what is taught
implicitly in economics is far more important than what is taught explicitly
(Cropsey 1955; Schumacher 1974; Duhs 1982; Duhs & Alvey 1989). In
Cropsey’s view, when students learn welfare economics they are really
being taught a particular, contentious view of political philosophy without
either the instructor or the student necessarily being aware of that fact. In
Schumacher's words (1974: 77), “Economics is being taught today without
any awareness of the view of human nature that underlies present day
economic theory. In fact, many economists are themselves unaware of the
fact that such a view is implicit in their teaching and that nearly all their
theories would have to change if that view changed.” For him, what is at
fault is the lack of depth with which subjects are taught and the lack of
metaphysical awareness. As he puts it, ideas such as relativism, positivism,
evolutionism and historicism are now so firmly lodged in our minds that
we are unconscious of their presence. They would not have penetrated so
deeply if they did not contain an element of truth. Nonetheless, in his view
(1974: 71-76) they are incomplete and dangerous, and are ultimately “a
106 Australasian Journal of Economics Education
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bad, vicious, life-destroying type of metaphysics” denying the relevance of
all metaphysics including themselves. Hence, Schumacher objects to the
silent, self contradictory teaching that all values are relative, except for the
putatively incontrovertible value that all values are relative. That singular
value itself aspires to the status of absolute truth.
The implicit presence of relativism, positivism and historicism in
contemporary social science introduces a strong metaphysical teaching, to
which Myrdal, Cropsey, Joan Robinson, Heilbroner, Schumacher, Etzioni
and Sen have all attempted to draw critical attention. In one way or another
they have their objections to value relativism, and to positivist
methodology. They do not accept the relativist doctrine that all human
values should necessarily be accepted as being of equal value. It is from
this root that they see an ideological element in economic “science”, and
for this reason that they see critical importance in the teaching of economic
philosophy. It is by the importation of relativism, positivism and
historicism that welfare economics has come to celebrate individual
psychology over political philosophy. The core point of these philosophical
critics of orthodoxy is encapsulated in Cropsey's words that “every logic
presupposes a metaphysic”. This sentiment reappears in Myrdal in the
more prosaic words “there can't be a view, except from a viewpoint.”
Those who see significance in such understandings are naturally compelled
to see the teaching of economic philosophy as a matter of primary
importance.
4.
CONCLUSIONS
Capitalism is essentially a system of free enterprise with some
allowance for government interventions in specified conditions. It is
essentially a system built on acceptance of John Locke's political
philosophy supplemented by Adam Smith's elaboration of the economic
policies consistent with that philosophy. In Locke's understanding – as
against the understanding of all previous philosophers - man is by nature
individualistic (selfish) and acquisitive. It follows that the institutions
required for a good society are therefore ones which give free expression to
that individualism and acquisitiveness. Accordingly, what is needed is
private property and unlimited acquisitiveness or inequality of wealth.
Marxists start with an alternative conception of the nature of man and
obviously reach different conclusions. If what is natural to man is
selflessness and collectiveness (see Table 1 re the philosophical conception
of the nature of man in Marxist thought), it follows that private property
and unlimited acquisitiveness will be divisive and disruptive, and that the
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institutions of a good society are instead to be found in the public property
of communism. Likewise it is apparent there will be others in an
intermediate position – deriving their conceptions of a good society from
Rousseau or Dewey or Kant or Aristotle – whose philosophical a prioris
will drive them to seek at least some modification of the institutions
favoured by either of the above intellectual camps.
Putatively simple and unambiguous words such as ‘man’, ‘freedom’,
'equality' and ‘rationality’ are in fact ever present bones of contention. It is
the conflicting a priori definitions of such terms that underpin dissension
between the three broad theoretical perspectives considered in this paper
(Table 1) and which constitute the mainsprings of dispute about many
practical economic policies.
This is apparent in debates within
development economics, including the now famous critiques provided by
Sen (2000), and in disputes about the economics of law (Posner 1979; Duhs
2005), and in the dispute between Friedman and various institutionalists
about schools policies. More detailed consideration is given to selected
cases in a companion paper titled “Teaching Economic Philosophy:
Economics, Ethics and the Search for the Right Maximand” (Duhs 2006).
For reasons related to the inevitable presence of a prioris, Myrdal
regarded economics as a “soft science” requiring explicit revelation of the
value premises of its authors. Joan Robinson and Robert Heilbroner
similarly called for more explicit attention to ideological elements in the
teaching of economics. Such calls of course tend to undermine the
scientific pretensions of the economics profession, and are sometimes so
unwelcome as to have those who demand attention to the contestability of
a priori definitions denounced as the enemies of science. Critics of this
view in fact see a fundamentalist shoe as being on the other foot, however,
as doors are closed to on-going debate over basic socio-economics
questions. As Hodgson (2001; 2004) puts it: today the grand view is more
difficult to obtain, and the big questions fall out of favour, while the subdisciplines specialise in minute technicalities. He looks to the post-autistic
economics network to help reverse the narrowing and over-formalisation of
economics which proceeded apace in the latter half of the twentieth
century, and which he sees as having been intensified by the accelerated
movement into business schools. The root cause perhaps remains,
however, that increasing specialisation in sub-disciplines impairs wideranging reflection and inter-disciplinary dialogue as uni-versities become
multi-versities, and questions of integrated social 'knowledge' come to be
crowded out. Whereas philosophy once stood as the apex of all enquiry, an
induction in philosophy today has become the exception rather than the
rule.
108 Australasian Journal of Economics Education
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Given the importance to mainstream economics of utilitarianism,
Pareto optimality, positivist methodology, and the notions of consumer
sovereignty and value relativism, there are obvious reasons to increase
awareness of the implications of those concepts by not merely tolerating
the teaching of economic philosophy but by recognising that implicit
metaphysical concepts are in fact fundamental to an understanding of
economics and of why economists disagree. Whether or not there is
unanimous agreement that what is presently taught implicitly is more
important than what is taught explicitly, the fact that significant question
can be raised about the implicit teaching in contemporary economics is a
challenge that remains to be met.
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